Directional credit spread

#1
Directional credit sread
i use this in trending market

strategy:
When trend is up sell put
when trend is down sell call

trend:
Up:when successive lows make higher and higher lows
down:when successive ups make lower and lower ups

trend change: When nifty breaks low when in up trend and breaks high when in low trend

as this strategy surely makes loss when trend changes never ignore hedging

strike price:based on max open interest when strategy is entered

entry:

There should be 45-30 days to expiry of the option series

in up trend: Nifty has to make down move.
When nifty closes above the high of previous bar that is the entry point

in down trend: Nifty has to make up move.
When nifty closes below the low of previous bar that is the entry point.

Exit:when new trade is taken or 80% of max profit is achieved
 

travi

Well-Known Member
#3
Directional credit sread
strategy:
When trend is up sell put
when trend is down sell call
The word spread in options implies multiple option legs.
Either you have not defined strategy correctly or missing something.

Readers will interpret your strategy definition as naked puts or naked calls selling based on trend.

Moreover, credit spreads involve buying a lower delta option so as to hedge the spread.
So for call credit spreads, u'd sell a strike and buy a higher strike option.
The difference of the strikes would be the max loss in points in pay-off calc.
 
#4
Yes Ravi. Spread is always selling a call and buying a higher call for hedge. Selling a put and buying a lower put for hedge.
As this is an expiry week I will defer entry next week.
 

lemondew

Well-Known Member
#6
Any sl on adverse movement. Lets say after we close above the high of previous bar in uptrend. The down trend resumes and we reach the sold strike price Do you hold loosing positions??
 
#7
Hedging is a better choice than stop-loss. A stop-loss order is a limit order. When price suddenly surpasses stop-loss price, stop-loss will not trigger and you will be struck. But hedge, when price surpasses true loss price, hedge will offset loss and you are protected. Hope I am clarifying.
 

lemondew

Well-Known Member
#8
by selling put one gets limited profit by buying call one gets unlimited profit. So why sell put in uptrend

Hedging is a better choice than stop-loss. A stop-loss order is a limit order. When price suddenly surpasses stop-loss price, stop-loss will not trigger and you will be struck. But hedge, when price surpasses true loss price, hedge will offset loss and you are protected. Hope I am clarifying.
 
#10
Today I entered this strategy

SERIES: JUNE 17
TREND: UP
MAX OPEN INT PUT 9300
LOTS 2
STRIKE 9300 50.80 7620.00
HEDGE 9200 33.95 -5092.50
MAX PROFIT 2527.50
MAX LOSS (100*150)-2527.50 12472.50
TARGET PROFIT 80% 2022.00
 

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